Exhibit 10.15
Execution Version
GSL INDUSTRIAL PARTNERS, L.P.
0000 XXXXXXXXXX, XXXXX 000
XXXXXXX, XXXXX 00000
Xxxxx 0, 0000
Xxxxxxx XXX, XX
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxxx (Xxxx) Xxxxx
Re: Xxxxxxx Money Contract dated effective as of December 27, 2005 (the
"Initial Contract"), by and between GSL INDUSTRIAL PARTNERS, L.P., as
buyer ("Buyer"), and SUNTRON GCO, LP, as seller ("Seller"), regarding
the sale and purchase of approximately 36 acres of developed land, plus
an additional approximately 7.5 acres of undeveloped land, located at
0000 Xxxxxxxxxx Xxxx, Xxxxx Xxxx, Xxxx Xxxx Xxxxxx, Xxxxx (the
"Property")
Dear Xx. Xxxxx:
Reference is hereby made to the Initial Contract, as amended by that
certain letter agreement dated February 2, 2006, executed by Seller and Buyer
(the "First Letter Agreement"). All capitalized terms used in this second letter
agreement (the "Second Letter Agreement") and not otherwise defined shall have
the same meanings as set forth in the Initial Contract as modified by the First
Letter Agreement. On and after the date hereof, all references to the "Contract"
shall mean the Initial Contract as modified by the First Letter Agreement and
this Second Letter Agreement.
For and in consideration of the mutual covenants and agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Seller and Buyer hereby agree as follows:
(1) SALES PRICE. Section 4 of the Contract shall be, and hereby is,
amended, replaced and superseded to read in its entirety as follows:
"4. SALES PRICE. The Buyer will pay the Seller the amount of NINETEEN
MILLION THREE HUNDRED THOUSAND AND NO/100 DOLLARS ($19,300,000)
("SALES PRICE"), as follows:
(a) Seventeen Million Eight Hundred Thousand and No/100 Dollars
($17,800,000) of the Sales Price (the "INITIAL PAYMENT"), shall
be paid in cash at Closing; and
(b) One Million Five Hundred Thousand and No/100 Dollars ($1,500,000)
of the Sales Price (the "DEFERRED PORTION OF THE SALES PRICE"),
shall be paid by Buyer to Seller subject to and in accordance
with the terms of this Section 4(b).
Suntron GCO, LP
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(i) Beginning on April 1, 2007, and subject to the satisfaction
of the Financial Test (as such term is defined below), Buyer
shall make payments to Seller, on a fiscal quarter basis, of
$200,000 each (each, a "DEFERRED PAYMENT"), until the Deferred
Portion of the Sales Price has been paid in full. All provisions
of the Contract dealing with the Deferred Portion of the Sales
Price shall survive the Closing and shall remain in effect until
all of the Deferred Portion of the Sales Price has been paid to
Seller. For purposes of this Section 4(b), the term "FINANCIAL
TEST" shall consist of two (2) different financial tests that are
based on the financial results of Seller's parent Suntron
Corporation, a Delaware corporation ("SUNTRON"), as follows:
(A) The first test is based on and is a test of
Suntron's aggregate EBITDA margin (on a consolidated basis)
(being the percentage that results from dividing EBITDA by
net sales) for the most recent period consisting of four (4)
consecutive fiscal quarters. For purposes hereof, Suntron's
"EBITDA" is defined as Net Income or Loss (determined in
accordance with U.S. generally accepted accounting
principles consistently applied ("GAAP")) plus Interest
Expense, Income Taxes, Depreciation and Amortization. For
purposes of this calculation, Suntron's GAAP Net Income or
Loss will be further modified to exclude (to the extent the
following have been included in the calculation of EBITDA):
(I) up to $5 million of cumulative cash restructuring costs
actually incurred, (II) all non-cash stock compensation,
impairment and restructuring charges, (III) up to $1,500,000
of legal fees actually incurred related to the Applied
Material litigation more particularly described in Suntron's
periodic filings with the U. S. Securities and Exchange
Commission, and (IV) the earnings impact (whether positive
or negative) of any settlement in the Applied Material
litigation.
(B) The second test is referred to as the Free Cash
Flow ("FCF") test. This test is based on and is a test of
the ratio of Suntron's FCF to Suntron's "Cash Interest
Expense" for the most recent period consisting of four (4)
consecutive fiscal quarters. FCF for this calculation is
defined as EBITDA from the financial test described in
subsection (A) above less Suntron's net cash payments for
capital expenditures (computed by taking the difference
between cash paid for capital expenditures and cash proceeds
from sales of capital assets as reported in Suntron's cash
flow statement under GAAP). The amount of net cash payments
for capital expenditures that are included in any 4 quarter
period shall be the lesser of (I) $2,700,000 and (II) the
net amount actually paid by Suntron during such period. For
purposes hereof, "Cash Interest Expense" is defined as
Suntron's accrual basis interest expense determined in
accordance with GAAP less (I) amortization of debt issuance
costs and (II) interest expense that is "payable in kind"
pursuant to the terms of Suntron's debt agreements.
The Financial Test is considered to be satisfied if any one of
the following results are achieved:
Suntron GCO, LP
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(X) Suntron's EBITDA margin is equal to at least 4.0%
for the most recent period consisting of four (4)
consecutive fiscal quarters; or
(Y) Suntron's FCF ratio is equal to at least 2.0 to 1.0
for the most recent period consisting of four (4)
consecutive fiscal quarters; or
(Z) Suntron's EBITDA margin is equal to at least 3.0%
and Suntron's FCF ratio is equal to at least 1.5 to 1.0 for
the most recent period consisting of four (4) consecutive
fiscal quarters.
(ii) Buyer shall make a Deferred Payment to Seller on or before
the date that is fifteen (15) days after Buyer has received
certified financial calculations from Seller demonstrating
compliance by Suntron with the Financial Test for the required
time period in relation to such payment. Such written
certifications of the financial calculations shall be made and
certified by Suntron's Chief Financial Officer and shall include
detailed calculations of the applicable Financial Test, provided
Buyer shall have the right to request reasonable documentation
which supports such calculations and to request other
clarification related to such calculations. In the event that the
requirements of the Financial Test are not met by Suntron for any
particular period, then Buyer shall not be obligated to make any
more Deferred Payments to Seller unless and until Suntron
thereafter meets the Financial Test. Interest shall accrue on the
unpaid portion of the Deferred Portion of the Sales Price at a
rate equal to six and one-half percent (6.5%) per annum,
compounded quarterly, provided that (A) such interest shall
accrue and shall not be paid to Seller until all of the Deferred
Portion of the Sales Price has been paid by Buyer to Seller in
accordance with the terms hereof and (B) Buyer and Seller agree
that if the loan from Buyer's first lien lender requires that
Buyer pay an interest rate other than 6.5% per annum, the actual
rate that Buyer pays from time to time on such loan shall be
substituted for the rate set forth herein.
(iii) In addition to the foregoing, and without regard to whether
Seller is meeting the Financial Test, at any time that (A) the
aggregate amount of (I) the unpaid portion of the Deferred
Portion of the Sales Price, plus (II) the amount remaining
drawable under the Supplemental LOC (as such term is defined in
the Lease) (collectively, the "WITHHELD FUNDS"), exceeds (B) the
Applicable Rent Balance (as such term is defined in the Lease),
then Buyer shall, within ten (10) business days after Buyer's
receipt of written request from Seller, pay to Seller out of the
unpaid portion of the Deferred Portion of the Sales Price (plus
any accrued but unpaid interest thereon) the amount, if any, by
which the Withheld Funds exceed the Applicable Rent Balance, but
not to exceed the remaining unpaid portion of the Deferred
Portion of the Sales Price (plus any accrued but unpaid interest
thereon).
(iv) In addition, at any time after the date that is forty-two
(42) months after the Commencement Date of the Lease (as such
term is defined in the Lease), Suntron has achieved the Financial
Test for eight (8) consecutive quarters, and provided that there
is no Event of Default by Seller then existing at the time of
Seller's request or Buyer's funding, Buyer shall, within ten (10)
business days
Suntron GCO, LP
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after Buyer's receipt of written request from Seller, pay to
Seller any portion of the Deferred Portion of the Sales Price
(plus any accrued but unpaid interest thereon) that remains
outstanding and unpaid as of such date.
(v) On the date that is seven (7) years after the Closing Date,
and provided that the Lease has not been terminated or the leased
premises permanently repossessed by Buyer, whether or not the
Lease is terminated, prior to such date, Buyer shall pay to
Seller any portion of the Deferred Portion of the Sales Price
(plus any accrued but unpaid interest thereon) that remains
outstanding and unpaid as of such date.
(vi) Notwithstanding any provision of this Contract to the
contrary, Buyer shall not be obligated to make any payments to
Seller towards the Deferred Portion of the Sales Price if there
exists at the time such payment would otherwise be due (A) any
monetary or payment Event of Default under the Lease, or (B) any
non-monetary Event of Default under the Lease, which non-monetary
Event of Default is reasonably expected to have an adverse affect
to Buyer or the Property in the amount of $100,000 or more. Upon
the cure of any such Event of Default, however, unless the Lease
has been terminated or the leased premises permanently
repossessed by Buyer, whether or not the Lease is terminated, any
payment that was delayed due to the existence of the Event of
Default shall be payable within ten (10) business days after
Buyer's receipt of written request therefor from Seller."
(2) APPLICATION OF XXXXXXX MONEY. The third sentence of Section 5 of the
Contract shall be, and hereby is, amended, replaced and superseded to read in
its entirety as follows:
"At Closing, the Xxxxxxx Money and any interest earned thereon will be
applied to the Initial Payment."
(3) NO LIENS. Section 10(a)(1) of the Contract shall be, and hereby is,
amended, replaced and superseded to read in its entirety as follows:
"(1) With no liens, assessments, or Uniform Commercial Code or other
security interests against the Property which will not be satisfied
out of the Initial Payment; and"
(4) CLOSING PAYMENT. Paragraph 2(a) of ATTACHMENT IV of the Contract shall
be, and hereby is, amended, replaced and superseded to read in its entirety as
follows:
"(a) the Initial Payment, subject to prorations and other adjustments as
may be set forth herein;"
(5) LEASE. The form of the Lease attached as EXHIBIT "C" to the Contract
shall be, and hereby is, amended, replaced and superseded by the form of the
Lease attached hereto as EXHIBIT "C"-REPLACEMENT.
(6) INSPECTION PERIOD. Paragraph 4 of the First Letter Agreement is hereby
modified by the following: Seller and Buyer agree that the Inspection Period,
and Buyer's right to
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terminate the Contract by the delivery of the Inspection Notice, shall be and
hereby is extended until one (1) business day after the later of (a) the date of
the final platting of the Property in accordance with the provisions of
paragraph 1 of the First Letter Agreement; (b) the date on which Seller has
notified Buyer of the completion of the repairs and replacements to the Property
and provided Buyer with confirmation of the transferability of the Roof
Warranties, both as provided for in paragraph 3 of the First Letter Agreement.
The Closing shall occur no earlier than three (3) business days after the end of
the Inspection Period.
(7) APPROVAL OF BUYER'S FINANCIAL PARTNER. Seller and Buyer acknowledge and
agree that the obligations of Buyer under the Contract are subject to the
approval of such transactions by Buyer's prospective financial partner, AEW
Capital Management, L.P. ("AEW"). If AEW has not approved the transactions
contemplated by the Contract by March 20, 2006, then Buyer shall have the right,
exercisable by written notice delivered by Buyer to Seller no later than 5:00 pm
Houston, Texas time on March 22, 2006, to terminate the Contract. Upon any such
termination, the Xxxxxxx Money shall be returned to Buyer free and clear of all
rights and claims of Seller with respect thereto, and neither Buyer nor Seller
shall have any further rights or obligations hereunder (except for matters
expressly stated in the Contract to survive termination).
(8) CLOSING DATE.
(a) Seller and Buyer agree that the Closing shall occur simultaneously with
the closing and funding of Suntron's proposed refinancing of Suntron's existing
senior credit facility with Citicorp USA, Inc. with a new senior credit facility
provided to Suntron by US Bank ("SUNTRON'S REFINANCING"); provided that the
Closing shall occur no earlier than March 23, 2006 (in the event the actual
closing and funding of Suntron's Refinancing occurs prior to such date) and not
later than March 31, 2006.
(b) Notwithstanding the foregoing, if Suntron's Refinancing has not
occurred by March 31, 2006, either party shall have the right to extend the
deadline for the occurrence of Suntron's Refinancing until May 31, 2006, by
giving written notice of such extension to other party. Further if Suntron's
Refinancing has not occurred by May 31, 2006, then either party shall have the
right at any time thereafter to terminate the Contract by giving written notice
of termination to the other party and the Xxxxxxx Money shall be refunded to
Buyer.
(c) Seller and Buyer agree to execute and deliver in escrow with the Title
Company all documents and instruments required to effect the Closing within
three (3) business days following the end of the Inspection Period.
(d) Notwithstanding anything in this Paragraph 8 to the contrary, Buyer
shall not be obligated to deliver the Initial Payment, and the Closing of the
Contract shall not occur, until the actual closing and funding of Suntron's
Refinancing.
(9) SUNTRON BOARD APPROVAL. Seller and Buyer acknowledge and agree that the
effectiveness of this Second Letter Agreement is conditioned on the approval of
the Board of Directors of Suntron.
Suntron GCO, LP
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(10) ARBITRATION. In the event there is a dispute between Buyer and Seller
as to (i) whether Seller has met the Financial Test for any period or (ii) any
other matters related to the payment to Seller of the Deferred Portion of the
Sales Price, Buyer and Seller agree to resolve such dispute by utilizing the
arbitration process (the "ARBITRATION PROCESS") set forth in this paragraph. In
the event there is a dispute between Buyer and Seller as to whether Seller has
met the Financial Test for any period or is otherwise qualified to receive a
payment from the Deferred Portion of the Sales Price, Buyer and Seller shall
meet to immediately resolve that matter in good faith and as expeditiously as
possible. If that matter cannot be resolved within ten (10) days after the
applicable due date for the Deferred Payment in dispute, then an arbitrator from
the list of arbitrators of the American Arbitration Association's Houston, Texas
office shall be jointly selected by Seller and Buyer, and that arbitrator shall
be unaffiliated with both Seller and Buyer and shall have at least five years
experience as an arbitrator (the "ARBITRATOR"). If Seller and Buyer cannot
mutually agree on the Arbitrator within five (5) business days, then the
Arbitrator shall be appointed by the American Arbitration Association. After
being duly appointed, the Arbitrator shall hold a hearing to determine the
question submitted (the "ARBITRATION"). At the Arbitration, the Real Estate
Industry Arbitration Rules of the American Arbitration Association then in
effect shall govern, including the Expedited Procedures. The Arbitration shall
commence within fifteen (15) days following appointment of the Arbitrator unless
a different time is specified in the Expedited Rules then in effect. Further,
the Arbitrator shall have the right to retain a nationally recognized accounting
firm (or other accounting firm mutually acceptable to Seller and Buyer), which
is independent of both Seller and Buyer, to assist the Arbitrator in analyzing
financial information. Within ten (10) days after the Arbitration, the
Arbitrator shall issue a decision in writing and in duplicate (the "ARBITRATION
RULING"), one counterpart thereof to be delivered to each of Seller and Buyer.
The Arbitration Ruling shall be binding, final and conclusive on Seller and
Buyer, and may be entered in any court having jurisdiction. The costs of the
Arbitration shall be borne by the party against whom the question so submitted
is resolved, unless otherwise expressly provided in the Arbitration Ruling (such
matter being an issue on which the Arbitrator is granted discretion to apportion
based on the equities of the specific situation). Each party shall pay on
request by the American Arbitration Association or Arbitrator all up-front costs
of the Arbitration that are required to be prepaid. If either party fails to pay
its share of the up-front costs of arbitration within ten (10) days after the
American Arbitration Association or Arbitrator has notified such party that its
fifty percent (50%) initial share thereof is due, and within an additional
period of ten (10) days after the other party's written demand, then the
Arbitrator shall make its ruling against the party who failed to pay such costs.
Nothing herein contained shall preclude either Seller or Buyer from seeking any
injunctive relief.
(11) OFFSET RIGHT OF SELLER. If an Arbitrator has determined that a payment
for the Deferred Portion of the Sales Price is due to Seller from Buyer, and
Buyer fails to make such payment within ten (10) days following notice of the
Arbitrator's decision, then Seller shall be entitled to exercise the offset
rights described in Section II of Exhibit "G" of the Lease.
Except as amended hereby, the Contract remains in full force and effect in
accordance with its original terms. Telecopy delivery of this Second Letter
Agreement signed by each party to the other shall be binding and effective the
same as if an original signed copy has been delivered by each party to the
other. This Second Letter Agreement may be executed in multiple
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counterparts, each of which shall be considered an original, and all of which
together shall constitute one and the same document.
* * *
Suntron GCO, LP
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If you have any questions or comments with respect to any of the foregoing,
please do not hesitate to contact me.
Sincerely yours,
BUYER:
GSL INDUSTRIAL PARTNERS, L.P.,
a Texas limited partnership
By: GSL Partners GP, LLC, a Texas
limited liability company,
its general partner
By: /s/ WELCOME X. XXXXXX, XX.
------------------------------------
Welcome X. Xxxxxx, Xx.,
Chairman and Chief
Executive Officer
AGREED TO AND ACCEPTED
this _______ day of March, 2006:
SELLER:
SUNTRON GCO, LP,
a Texas limited partnership
By: Rodnic LLC, a Texas limited
liability company,
its general partner
By: /s/ XXXXX X. XXXXX
---------------------------------
Xxxxx X. Xxxxx,
Chief Financial Officer
